January 19, 2012

Merkel's Dangerous Addiction to Austerity

Austerity has failed in the eurozone. This simple truth is grasped more widely than ever, including in the most unlikely places. Explaining its decision to downgrade the credit ratings of nine eurozone countries including France, Standard & Poor's - hitherto an advocate of extreme fiscal tightening - cited concerns over growth, not borrowing. "A reform process based on a pillar of fiscal austerity alone risks becoming self-defeating," it warned, "as domestic demand falls in line with consumers' rising concerns about job security." The lesson of the 1930s - that you can't cut your way out of a recession - is as true today as it was then.

RECOMMENDED ARTICLES

Germany has long insisted that austerity be the primary strategy used in confronting the ongoing euro-zone debt crisis. Italy has now joined France in demanding a more nuanced approach. Prime Minister Monti will present his... more ››

"Dinner for one”, a 1963 British comedy sketch barely known in its country of origin, is Germans’ favourite television viewing on New Year’s Eve. Year after year they delight at the sight of Miss Sophie celebrating her... more ››

German Chancellor Angela Merkel seems to be the latest foreign statesman to discover just how astounding Italy statesmen can be. Her intervention in Italian politics is widely credited for forcing Silvio Berlusconi (who had... more ››

The main significance of the Merkozy summit is that it seemed to signal a shift in emphasis. True, the austerity agenda - promoted by the Germans and grudgingly accepted by the French - is still there. Indeed, Mr Sarkozy... more ››

At each stage of the euro crisis during the past two years, Chancellor Angela Merkel has seemed to do the absolute minimum needed to keep the single currency together – but no more. This minimalist approach to the euro... more ››